Well-regarded new SUVs like the 2015 GMC Yukon Denali helped push GM's margins in North America to a very solid 9.5% in the third quarter. Source: General Motors Company.

General Motors Company (NYSE:GM) on Thursday reported third-quarter net earnings of $1.4 billion, as strong margins in North America were offset by pressures in Europe and South America. Revenue was $39.3 billion, a slight increase from a year ago.

Excluding special items, GM earned $0.97 a share in the third quarter. That's up by a penny from the year-ago period, and ahead of the $0.95 consensus analyst estimate as reported by Bloomberg.

It also defied bearish expectations set by a top Wall Street analyst earlier this month, in a report that led to a 6% drop in GM's share price. GM shares rose nearly 3% in pre-market trading on the news.

A look under GM's hood, region by region

The best way to understand General Motors' earnings reports is to look at the results from each of the company's global business units, or "segments," in GM's lingo. Note that these numbers don't include the effect of taxes or interest charges, as that's how GM reports them.

North America
GM North America earned $2.45 billion in the third quarter, up from $2.2 billion in the year-ago period.  That's a very strong result that comes despite an ongoing safety scandal and the recall of over 30 million GM vehicles this year. A slew of new products -- including GM's new-for-2014 pickups, its new full-size SUVs, and the much-improved Cadillac CTS -- have given GM higher average transaction prices, boosting margins in the region to a fine 9.5% despite rising incentives. 

GM Europe posted a loss of $387 million in the third quarter. That's worse than the $214 million loss it posted a year ago -- but a wider loss was not unexpected. A sharp slowdown in new-vehicle sales in Russia has affected all of the automakers with a significant presence in the country, including GM. (Rival Ford (NYSE:F) lowered its guidance earlier this month, in part on Russia-related concerns.) Ongoing restructuring costs and unfavorable foreign-exchange moves also weighted, but GM reiterated that it expects Europe to return to profitability in 2016.  

International Operations
GM's International Operations segment earned $259 million in the third quarter, down from $323 million in the year-ago period. But the region's equity income, mostly from GM's massive joint ventures in China, rose to $490 million from $424 million in the year-ago period. GM's sales in the world's largest new-vehicle market are second only to giant rival Volkswagen, and its healthy 9.6% operating margin in China shows that its operations there continue to be strong despite slowing sales growth. For the region as a whole, cost reductions and improvements in pricing and product mix weren't quite enough to offset lower wholesale volumes in markets outside of China.

South America
GM South America lost $32 million in the third quarter, a sharp drop from a profit of $284 million in the year-ago period. Tough economic conditions in several key countries in the region -- including Brazil, the largest market in South America  -- have led to a sharp reduction in new-vehicle sales across the industry. Rival Ford sharply lowered its expectations for South America earlier this month, while Fiat Chrysler said that it expected its market-leading position in Brazil to insulate it somewhat. GM executives expressed less concern than Ford's, but they acknowledge that the going is likely to be rough for a while. 

GM Financial
GM's in-house financing arm reported a profit of $205 million in the third quarter, down slightly from $239 million a year ago. Leasing is up, subprime lending is down (though still somewhat ahead of industry averages), and credit losses rose very slightly to 2% from 1.9% a year ago. Overall, the unit continues to be in solid shape.

Special items and GM's cash position
GM took charges of $321 million in the third quarter for a few special items, none of which were surprising. The total included $132 million in charges related to the (massive) flooding damage at GM's technical center in Warren, Michigan, and $194 million in "intangible asset impairment charges" related to the reduced expectations for GM's Russian operations.

GM did show a sharp drop in adjusted free cash flow, from a positive $1.33 billion a year ago to a negative $898 million this time around. GM attributed that drop in part to a calendar quirk -- there was one extra weekly payment cycle to GM's suppliers in the third quarter versus the year-ago period -- and partly to "cash payments related to repairing recalled vehicles, including costs to expedite parts to dealers."

The upshot was a small reduction in GM's cash position, to $26.1 billion from $28.4 billion at the end of last quarter. Together with GM's available credit lines, the company had "total automotive liquidity" -- cash and credit available to its operations, in other words -- of $36.6 billion. That strong cash position exists to preserve GM's ability to develop new products through an economic downturn; it's more than ample.

The upshot: Despite "headwinds," GM is still on track

GM is of course still a work in progress. While margins in North America have moved into the range GM executives have been targeting for a while, it still has work to do in Europe and in South America -- and a major expansion effort is under way in China, where it fell behind VW last year.

But GM's third-quarter result was better than many observers had expected. Despite the recalls, despite pressure on pickup-truck pricing, despite slowing growth in China, despite all of the things cited as "headwinds" by pessimistic Wall Street observers, GM posted results that show that it's -- at least for now -- still solidly on track with the expectations set by CEO Mary Barra and her team.